It has been a particularly grim first half of the year for the Hong Kong Stock Exchange. The benchmark Hang Seng index has fallen by more than 20%, its poorest performance for 14 years and many are saying there will be worse to come.

An even more dismal trading record has been seen on the second-tier GEM market, home to several stocks that rarely trade. Despite hopes that GEM would be a vibrant market for up-and-coming companies, it rarely manages to attract new listings.

Conceived as a counterpart to the US Nasdaq market, the GEM has spent almost a decade in steady decline and attracts daily trades totalling about 1% of the business done on the main market.

That is why the stock exchange has launched measures to encourage new listings and breathe life into the ailing GEM. Listing fees have been halved, requirements on profitability before listing have been raised and it has been made easier for GEM companies to make the transition to the main board.

Meanwhile, a consultation is to be launched on the creation of an exchange that would exclude retail investors and give professional investors access to companies with less of a record, looser corporate governance requirements and a higher level of risk.

The model for this seems to be a light version of London’s Alternative Investment Market. But unlike the UK market, Hong Kong’s new exchange appears to be focused on winning listings from outside the territory, specifically from mainland China.

There is a degree of schizophrenia here with one board, GEM, attempting to raise standards to attract more business while plans are laid for another market with what can only be described as lower standards.

Aficionados of lower standards are pretty well catered for in the two mainland Chinese markets, which have an impressive list of regulations but a patchy record on enforcement, disclosure and overall probity. It is hard to see why Chinese companies would wish to come to Hong Kong for more of the same.

Indeed, the main reason for the lacklustre performance of the GEM market is the perception that it is second class and a place for dumping listings of dubious quality. While the exchange is doing its best to address this problem, it also seems to be saying that it wants to create another place where second class is good enough.

This flies in the face of all experience in Hong Kong where the big story of recent years has been the listing of leading Chinese companies, attracted to the territory precisely because standards are higher and international investors can feel more confident doing business in this environment.

An exchange spokesman sees this situation in a different light. He said: “The purpose of this exercise [the professional board] is not to lower regulatory standards per se but rather to explore the feasibility of opening up new market segments.” Ah yes, new market segments, where have we heard about them before?

This was precisely the rationale for the GEM board when it was launched in 1999 but the exchange claims it has a different rationale – to become a transit stop before listing on the main board.

Fortunately memories tend to be short in Hong Kong and so we are expected to forget what happened nine years ago.

The exchange is awash with other ideas for promoting itself. It is to launch a gold futures market and is discussing the creation of an Islamic bond trading platform and an oil futures trading centre. Ambition is a fine thing but the Hong Kong exchange might consider learning from experience before plunging into new ventures.